New ethical challenger bank hits out at Monzo and Revolut, says personalisation is future of banking

The well-travelled co-founder of a new challenger bank believes the future for neobanks is to focus on a particular theme or demographic, and gathering than 'hoovering up' customers en masse.

Hailing from India, Shruti Rai has worked in the US (at payment firms Remitly), moved to the UK (to launch Remitly’s UK app), had a spell at crypto outfit Ripple, taking time out to have a baby, before deciding to launch a new challenger bank. Rai is one of five co-founders of Novus, whose aim is to create an ecosystem that connects consumers’ spending habits to purpose-driven brands and sustainable projects.

Rai, also chief growth officer of Novus, is determined to prove that by honing in on a theme it will help it steal a march on other neobanks.

She told AltFi: “It's definitely a crowded market, there are so many UK neobanks.” 

“But I feel like the main philosophy that a lot of UK banks went live with was to build for everybody and provide like a really cool UX and UI, so you have never have to go to bank branch again. 

“But I feel like they have not managed to monetise their users as they expected to because obviously a lot of the users of Monzo and Revolut are free and they are losing money on that.”

For a neobank to be more financially robust, she says, it is better to focus on a segment or theme and build services around that.

The launch product of Novus is a banking app, within which sits a marketplace, with 130 “ethical” brand partners, which includes the likes of HelloFresh, Just Eat and Ocean Bottle. 

Novus offers cashback rewards for its customers, which spend with its “ethical” partners. 

Also, every time a Novus user taps their cards, a percentage is donated to various environmental and social causes.

Users can track the progress of these projects as well as tracking and offsetting their carbon footprint based on their card activity.

To date, Novus has been growing its customer accounts at a rate of about 10,000 per month for the past couple of months, a mix of males and females, city-centric, mostly between the ages of 18 and 35.

In the longer term, its ambition is to become a “super-app”, encompassing ethical investing, crypto, and business-to-business banking. But that is for the future.

Its main revenue stream is taking a commission from its brand partners, and it also makes money through interchange fees as well as taking a cut should its customers make an active charitable donation.

Novus, which translates into “new” in Latin, does not have a UK banking licence and has no need for one, says Rai.

It currently operates under an e-money licence via Railsr, which the co-founder admits means “we have some dependencies on them which we don’t want to”.

Although Novus is relatively small, Rai believes it can pinch customers from the likes of Monzo,Starling and Revolut, pointing out that 60 per cent of its users use other neobanks.

The Novus team is dotted around Europe, with its central team in the UK, while it also has staff in Bulgaria, Finland and Switzerland.

Rai likens Novus to Germany-based Tomorrow, a bank that funds and promotes Renewable Energy, Solar Power, Wind Power and sustainable agriculture.

In the US, a new crop of fintech startups have emerged trying to tackle the personalisation gap.

These fintechs are creating personalised banks dedicated to serving the unique financial needs of specific consumer segments, such as the LGBT community African Americans as well as environmentally-conscious consumers.

It is these types of challenger banks which represent the future of banking, Rai believes.